BKM MANAGEMENT CONSULTING BLOG

GSA Contracts Recession Proof?

If current trends continue, the federal government could spend more than $93 billion on IT in fiscal 2020, according to projections from Bloomberg Government analysts. In the wake of analysts calling for a recession this is interesting news.

The administration’s 2020 budget
proposal isn’t expected until at least March 11—another government shutdown
could push that out further—but the federal IT budget has grown about 5 percent
annually in recent years.

“Based on historical spending
trends, we’re looking at between $93 and $94 billion in an IT budget, about
half of which will go to civilian agencies and the other half will go to the
Pentagon,” Bloomberg Government Federal Market Analyst Chris Cornillie said
Tuesday during a webcast.

Cornillie noted a spike in IT
contract spending from fiscal 2017 to 2018, jumping from about $59 billion to
$64.7 billion. Bloomberg analysts expect that trend to continue based on
ongoing programs and initiatives, bringing the projected 2020 contract spend
upward of $68 billion.

Cornillie also offered projections
on three major IT areas: artificial intelligence, cloud and digital services.

The latest push to incorporate AI
technology in government—the White House’s American AI Initiative launched
Monday—does not include any funding, but Bloomberg analysts have found an
increase in spending among civilian and defense agencies. This information is
invaluable for Vendors interested in getting on schedule.

Agencies spent $592 million on AI
and machine learning technologies in fiscal 2018, including the first $100
million AI contract, awarded by U.S. Special Operations Command. Spending
could increase in 2019 by more than 40 percent to $850 million, according to
projections, with defense agencies outspending their civilian counterparts by
about $50 million.

While AI is one of the biggest
buzzwords in tech, cloud will remain the top IT spending category in the coming
year, according to Bloomberg analysts. Spending on cloud services has grown by
18 percent in civilian agencies and 28 percent in the Defense Department,
bringing the total spend to $4.1 billion in fiscal 2018. Based on current
trends, analysts expect cloud spending to top $5 billion before the end of
2019.

“Although the Pentagon is a relative
latecomer to cloud computing, spending on cloud at the Pentagon is increasing
dramatically,” Cornillie said.

Spending on digital services—things
like citizen-facing apps and web portals—has also been on the rise, gaining 5
percent to 10 percent annually in recent years. Agencies spent $4.3 billion on
these services last year and are on track to spend $4.6 billion in fiscal 2019.

Bloomberg analysts also noted this will be spurred by the December passage of the 21st Century Integrated Digital Experience Act, or 21stt Century IDEA, which requires agencies to improve digital services within the next two years. Spending for the Government is affected by recession luckily for all Government Contractors or those slick enough to get onto a GSA Schedule.